Managing Your Debt and Finances

Understanding how to manage debt can help your overall financial situation.

En español | Picture this: You’re driving along, within the speed limit of 35 mph. Realizing that you have a little push or pull — up or down — you decide to accelerate your speed another 5 mph. Hmm … so far, so good. All seems fine and you reason that maybe you could accelerate even another 5 mph, and so you do.

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In less than five minutes, when you’re now traveling 45 mph, you hear the wail of a siren and see the spinning red lights of a patrol car in your rearview mirror.

Is a similar scenario playing itself out in your financial life as you try to take control of your debt and finances? Sometimes, it’s all too easy for us to talk ourselves into spending a little more than we can really afford, only to anxiously discover we’ve crossed the limit and are in the red or close to it.

About 43 percent of American families spend more than they earn each year. In the last few years, the number of Americans in debt has escalated to record numbers. And in terms of overall debt (including credit cards and student and car loans), mortgage debt continues to rank highest on the list. Many homeowners are struggling to avoid foreclosure even as banks write off billions in consumer debt.

Given the fragile state of the economy, you need to develop a better understanding of consumer credit and become more financially savvy about how to best manage your debt and finances. This isn’t optional. And while millions of Americans are experiencing tough times, the Great Recession has been particularly difficult for blacks and Latinos.

A recent survey by Ariel Investments, a privately owned, Chicago-based money management firm, revealed that 21 percent of blacks (compared with 11 percent of whites) increased their credit card debt; 17 percent of blacks (compared with 7 percent of whites) are delinquent on a home, car and/or credit card payment; and 5 percent of blacks (compared with 1 percent of whites) may go or have already gone into foreclosure.

Additionally, a 2009 study by the Pew Hispanic Center showed that 9 percent of Latino homeowners say they’ve missed a mortgage payment or were unable to make a full payment; 3 percent said they received a foreclosure notice in the past year; and more than 76 percent of Hispanics say their personal finances are in fair (46 percent) or poor (30 percent) shape.